Janet and Mary entered into a contract in which Janet was to sell a car to Mary, for Sh. 250,000. Unknown to the parties, the car which had been parked at John’s garage had been burnt down that morning following a fire outbreak at the garage. Mary had paid Janet Sh. 100,000 as deposit. She now intends to sue Janet for breach of contract Advise Janet.

Janet and Mary entered into a contract in which Janet was to sell a car to Mary, for Sh. 250,000. Unknown to the parties, the car which had been parked at John’s garage had been burnt down that morning following a fire outbreak at the garage. Mary had paid Janet Sh. 100,000 as deposit. She now intends to sue Janet for breach of contract

Advise Janet. (8 marks)

ANSWER
• This problem is based on frustration of contract.
• It is apparent that the destruction of the car fire frustrated the contract between Mary and Janet and theredischarged the parties as neither of them was blameworthy. However, the deposit of Kshs. 100,000 paid Mary is recoverable.
• My advise to Janet is that there is no cause of alarm as there is no breach of contract. However, Mary is entitled to the Kshs. 100,000 deposit. Janet must refund the same.
• My advise is based on the provisions of the Law Reform (frustrated contracts) Act 1943 which deal with the adjustment of rights of parties when a contract is frustrated. Under the Act, when a contract is frustrated any money paid is recoverable.